Plastic Money

By:
Sunaina Verma
Shashikant
Mohd. Zeeshan
Shashank Tripathi
What is Plastic Money ?
Plastic money is a term that
is used predominantly in
reference to the hard plastic
cards we use everyday in
place of actual bank notes.

They can come in many

different forms such as
Cash Cards
Credit Cards
Debit Cards
Pre-paid Cash Cards
In-store cards
Cash Card or ATM Card
Cash Card or ATM Card
A card that will allow you to withdraw money directly from
your bank via an Automated Teller Machine (ATM) but it will not
allow the holder to purchase anything directly with it.
Unlike a debit card, in-store purchases or refunds with an ATM
card can generally be made in person only, as they require
authentication through a personal identification number or PIN.
In other words, ATM cards cannot be used at merchants that
only accept credit cards.
In some countries, the two functions of ATM cards and debit
cards are combined into a single card called a debit card or
also commonly called a bank card. These are able to perform
banking tasks at ATMs and also make point-of-sale
transactions, both functions using a PIN.
Credit Card
What are Credit Cards ?
Again this card will permit the card holder to withdraw cash
from an ATM, and a credit card will allow the user to
purchase goods and services directly, but unlike a Cash Card
the money is basically a high interest loan to the card holder,
although the card holder can avoid any interest charges by
paying the balance off in full each month.
A credit card is a small plastic card issued to users as a
system of payment. It allows its holder to buy goods and
services based on the holder's promise to pay for these
goods and services. The issuer of the card creates a
revolving account and grants a line of credit to the consumer
(or the user) from which the user can borrow money for
payment to a merchant or as a cash advance to the user.
Parties involved
Cardholder: The holder of the card used to make a
purchase; the consumer.
Card-issuing bank: The financial institution or other
organization that issued the credit card to the cardholder.
Acquiring bank: The financial institution accepting
payment for the products or services on behalf of the
merchant.
Merchant account: This could refer to the acquiring bank
or the independent sales organization, but in general is the
organization that the merchant deals with.
Parties involved
Credit Card association: An association of card-issuing banks
such as Discover, Visa, MasterCard, American Express, etc. that set
transaction terms for merchants, card-issuing banks, and acquiring
banks.
Transaction network: The system that implements the mechanics
of the electronic transactions. May be operated by an independent
company, and one company may operate multiple networks.
Affinity partner: Some institutions lend their names to an issuer to
attract customers that have a strong relationship with that
institution, and get paid a fee or a percentage of the balance for
each card issued using their name
Insurance providers: Insurers underwriting various insurance
protections offered as credit card perks
Transaction steps
1. Authorization: The cardholder presents the card as payment
to the merchant and the merchant submits the transaction to the
acquirer (acquiring bank). The acquirer verifies the credit card
number, the transaction type and the amount with the issuer
(Card-issuing bank) and reserves that amount of the cardholder's
credit limit for the merchant. An authorization will generate an
approval code, which the merchant stores with the transaction.

2. Batching: Authorized transactions are stored in "batches",

which are sent to the acquirer. Batches are typically submitted
once per day at the end of the business day. If a transaction is
not submitted in the batch, the authorization will stay valid for a
period determined by the issuer, after which the held amount will
be returned to the cardholder's available credit
Transaction steps contd
3. Clearing and Settlement: The acquirer sends the batch
transactions through the credit card association, which debits
the issuers for payment and credits the acquirer. Essentially,
the issuer pays the acquirer for the transaction.

4. Funding: Once the acquirer has been paid, the acquirer pays
the merchant. The merchant receives the amount totaling the
funds in the batch minus either the "discount rate," "mid-
qualified rate", or "non-qualified rate" which are tiers of fees the
merchant pays the acquirer for processing the transactions.

5. Chargebacks: A chargeback is an event in which money in

a merchant account is held due to a dispute relating to the
transaction. Chargebacks are typically initiated by the
cardholder. In the event of a chargeback, the issuer returns the
transaction to the acquirer for resolution. The acquirer then
forwards the chargeback to the merchant, who must either
accept the chargeback or contest it.
Costs
Credit card issuers (banks) have several types of
costs:
Interest expenses
Operating costs
Charge offs or Bad Debts
Rewards
Fraud
Promotion
 Revenues
Offsetting the costs are the following revenues:
Interchange fee
Interest on outstanding balances
Over limit charges
Fees charged to customers
Late payments or overdue payments
Charges that result in exceeding the credit limit on the card (whether
done deliberately or by mistake), called over limit fees
Returned cheque fees or payment processing fees (e.g. phone
payment fee)
Cash advances and convenience cheques
Transactions in a foreign currency. A few financial institutions do not
charge a fee for this.
Membership fees (annual or monthly), sometimes a percentage of the
credit limit.
Exchange rate loading fees.
Merits and Demerits to
Customer
Merits
Convenience
Allows a short term credit to customer
Provide more fraud protection than debit cards.
Many credit cards offer rewards and benefits
packages

Demerits
High interest and bankruptcy
Inflated pricing for all consumers
Weakens self regulation
Debit Card
What is Debit Card ?
This type of card will directly debit money from your bank
account, and can directly be used to purchase goods and
services. While there is no official credit facility with debit cards,
as it is linked to the bank account the limit is the limit of what is
in the account, for instance if an overdraft facility is available
then the limit will be the extent of the overdraft.
A debit card (also known as a bank card or check card) is a
plastic card that provides the cardholder electronic access to his
or her bank account(s) at a financial institution. Some cards
have a stored value with which a payment is made, while most
relay a message to the cardholder's bank to withdraw funds
from a designated account in favor of the payee's designated
bank account. The card can be used as an alternative payment
method to cash when making purchases.
Types of debit card systems
Online Debit System :Online debit cards require
electronic authorization of every transaction and the debits
are reflected in the users account immediately.
Offline Debit System : This type of debit card may be
subject to a daily limit, and/or a maximum limit equal to the
current/checking account balance from which it draws
funds. Transactions conducted with offline debit cards
require 23 days to be reflected on users account balances.
Electronic Purse Card System : Smart-card-based
electronic purse systems (in which value is stored on the
card chip, not in an externally recorded account, so that
machines accepting the card need no network connectivity)
Advantages
Customer having poor credit worthiness can opt
for debit card.
Instant finalization of accounts

Less identification and scrutiny than personal

checks, thereby making transactions quicker and
less intrusive.
A debit card may be used to obtain cash from an
ATM or a PIN-based transaction at no extra charge
Disadvantages
Limited to the existing funds in the account to
which it is linked
Banks charging over-limit fees or non-sufficient
funds fees based upon pre-authorizations, and
even attempted but refused transactions by the
merchant
Lower levels of security protection than credit
cards
More prone to frauds
Credit Card Vs Debit Card

Credit Card Debit Card

Transactions are of Transactions are of
Credit Nature Debit Nature

Risk of overspending No or less risk of over

spending
Interest is charged to Only Fees are charged
the holder of card in on yearly basis for card
case of overdrawing usage

Source of additional Eliminates need to carry

funds hard cash
In-Store Cards
What are In-store cards ?
These are used by the departmental stores
mainly as marketing tools to retain customers and
increases turnover. The main features of in-store
cards are as below:
Issued by big department stores or retailers.
Can be used only in retailers outlet or for
purchasing the companys products.
Little or no cost to retailers
Usually developed by the traders in partnership with
banks or financing companies who undertake the
administration and sometimes the financing
involved.
Types on In-store card
Budget Card: This card requires monthly payment on
behalf of the holders. The cost of goods purchased is
spread over a certain period.
Option Card: Here, payment can be either be made in
full or at the cardholders discretion. However, option
available is subject to a minimum repayment and interest
charged on the balance outstanding amount.
Monthly Card: The card holder is required to make the
payment every month. No extension of credit is given
beyond a month. This card differs for budget card, where
outstanding credit can be settled in 30 monthly
statements.
Pre-paid Cash Cards
Pre-paid Cash Cards
As the name suggests the user will add credit to the
card themselves, and will not exceed that amount.
These are usually re-useable in that they can be
'topped up' however some cards, usually marketed as
Gift Cards are not re-useable and once the credit has
been spent they are disposed of. They provide some
specials benefits or discounts to the holder of the card.
Pre-paid Cash Cards Examples:
DMRC Smart Cards.
Pantaloons Green card.
Cards used in Food courts of Malls.
ThAnK YoU !!!